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| Sunday, 26 October 2003 |
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Features |  |
| News Business Features Editorial
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Policy debate 'Regaining Sri Lanka' Do we have the competitive edge? by Amrit Muttukumaru The IMF/World Bank inspired 'Regaining Sri Lanka' policy document which is far from smooth-flowing, adopted by the UNF government in the absence of meaningful public debate as its blue print for the economic and social development of this country, apart from being highly unrealistic in terms of some of its key goals, is a recipe in true Bretton Woods fashion for social tensions which will exacerbate already prevailing anarchic conditions. These goals include early sustained double digit GDP growth and providing employment to additional 2 million persons. This is in spite of productivity particularly in the garment manufacturing sector currently being one of the lowest in the region. The envisaged double digit growth in the tourism sector which has recently been officially defined to mean an excess of two million tourists by 2010 seems not only unrealistic but also undesirable since the fragile eco-system and cultural sites will not be able to withstand the resultant stress. It is also not compatible with the targeting of the affluent segment of the market. The document also promotes the demise of the paddy farmer who has been the backbone of the rural economy apart from ensuring food security for the nation. With this demise, it also promotes a heavy migration into the urban sector in spite of already prevailing urban chaos. The key sectors identified for growth are Garments, Tourism, Tea and Information Technology. The central premise of the document is the primacy given to our private sector as the driver of the economy and the engine of growth. The implicit assumptions in the document are the following: * Competence of the private sector Incompetence Barring rare exceptions, the competence levels of our private sector could even be described as appalling. This is mainly due to its preponderant trading and commission agent mentality where it thrives on an unleveled playing field courtesy of the patronage of successive governments. This in particular includes our captains of industry and commerce. It is because of their dependence on government hand-outs and favours that they have virtually acquiesced with all actions by successive governments which have brought this country to the brink of collapse-socially, economically and politically. This weakness is manifest chiefly in the area of responsible leadership and management. Even a cursory comparison of the calibre, management competency and savvy of our business leaders with that of their peers in the region such as India, Singapore and Malaysia would largely prove to be quite an embarrassment. These are not exaggerations. Even a major or large portion of the much acclaimed profits of some so-called leading blue chip companies are due to the contribution of relatively cheaply privatized virtual state monopolies and those sectors receiving state patronage, some of them very asset rich. This includes bunkering services, port operations, power projects, insurance, distilleries, plantations, oxygen, property development and the like. It is now reported that the country's only international airport will be added to this list. The injection of key private sector management even into the cricket administration of this country has proved to be a disaster with the country poised to lose millions of dollars! The chances are that no one will ever be made truly accountable. It is common knowledge that no private sector function is complete without them paying obeisance to our largely self-serving politicians and their senior appointees to the bureaucracy. There is a tendency in this country to equate accounting qualifications with management competency. This is part of our problem. It is not sufficiently appreciated that a good manager particularly at senior level needs to have an entirely different mindset which at its core apart from integrity and leadership skills, also requires a holistic perspective of pertinent local/international developments and a grasp of all functional areas of management. How many of our business and political leaders fit this mould? This country has suffered and will continue to suffer due to a serious lacuna in this respect. The tragedy is worsened because they fail to realize this. This is exacerbated due to the continued absence of even one world class or at least a regionally competitive management and technology institute. The private sector has never shown any serious initiative to establish the same. In its place, we largely have a plethora of institutions both public and private with varying levels of mediocrity. There is also the growing phenomenon of management and leadership trainers both local and foreign also of unknown or dubious pedigree often with apparently exaggerated claims who seem to be doing nicely charging exorbitant fees in five star locations catering largely to a gullible clientele. One wonders whether they are in cahoots with some human resource managers in the corporate sector. On rare occasions, a purported foreign icon is brought in with much hype on an exhausting one day whistle-stop engagement. The usefulness of such an expensive exercise is highly questionable. It is due to this that we have largely become a country of mass mediocrity. It is this mediocrity and possibly lack of integrity that resulted in the banner headline Prime Minister, Ken Balendra head LMD opinion poll just below the masthead of the countrys largest circulation English daily- Daily News dated 9 October 2003. All this hullabaloo was in respect of both these personalities and some other big names being voted as the most effective national and business leaders since independence respectively by a mere 50 readers of LMD Voice of Business magazine (October issue) who responded to the survey. This farce does not end here, the newspaper quoting extracts from LMD states that out of 50 readers who responded to the survey, a staggering 33 (or 66 per cent) nominated Wickremesinghe (emphasis added). The word landslide is also used by LMD in this connection. None of the leaders concerned have had the sagacity to distance themselves from this obvious charade. Social irresponsibility Possibly if at all with rare exceptions, it could be said without any doubt that Sri Lankas experience in privatization has lacked transparency. Hence, not surprisingly, most of our privatization exercises have been tainted with severe allegations of corruption some of them horrendous. In spite of even convincing documentary evidence most commendably made available in some sections of the press, there has been no credible inquiry to date. In many instances, a public sector monopoly has been converted essentially into a private monopoly! The regulatory landscape of this country is reflective of the atrocious state of our corporate governance with conflict of interest being its trademark. This includes the apex Securities & Exchange Commission, the Institute of Chartered Accountants and the Accounting & Auditing Standards Monitoring Board. The Bank Supervision Department of the Central Bank has also made its own special contribution to this state of affairs. In spite of even fundamental provisions of the Banking Act seemingly being flouted with impunity by some large banks with big names, our Monetary Board seems unconcerned. The recent appalling insider dealing and cover-up cases which encapsulates all that is rotten in our corporate world involving some of the leading private sector, accounting, legal and regulatory personalities seem poised to get lost in oblivion like all other alleged transgressions in this country. Where is the early bravado exhibited by some of these personalities? Political instability It should be appreciated that ethical foreign investments as opposed to robber barons will only flow into the country if potential investors are assured of a stable political and social environment, minimum infrastructure, disciplined and competent manpower and adherence at least to the basic principles of good corporate governance. Issues such as Mack & Company should be viewed as an opportunity to honestly clean up the corporate sector particularly of its terrible conflict of interest syndrome. Sadly, Sri Lanka is greatly lacking in all these attributes. No amount of UNDP funded invest-in-peace foreign extravaganzas, BOI and ministerial hype can substitute for this. Political stability has been virtually non-existent in this country for several years. The crippling ramifications of this are manifest in the still far from resolved ethnic crisis with even fundamental Tamil grievances yet largely unaddressed, employee discontent with unions increasingly flexing their muscle, the rule of law and the judiciary in tatters, rampant corruption and abuse of power, all round lawlessness and violence extending even to the school system. None of the independent commissions are functioning in any meaningful manner. The Police and Bribery and Corruption Commissions are conspicuous in this connection. It is left to be seen as to how the recently formed Press Complaints Commission will measure up to its lofty ideals. Initial indications are not encouraging particularly in respect of some key appointments. Poor infrastructure Due mainly to a mix of poor governance, incompetence and corruption the country is still greatly debilitated in terms of even basic infrastructure. Although there has been some progress in certain sectors, this is far from commensurate with the investment outlay while continuing to be highly inadequate. This is true of critical areas such as education, health, water, sanitation, transport, road, port, power and energy which are in different degrees of disarray. Examples include, allowing diesel guzzling and environmentally harmful power generation projects to be established by blue chip local firms charging prices which are among the highest in the world guaranteed to cripple local industry, allowing a highly questionable cement bagging facility to be established within the already congested Colombo port and controversial road projects. The condition of the hapless plantation and garment workers who are the backbone of the economy continue to be largely pathetic other than in some rare exceptions. This does not prevent the regional plantation companies charging tens of millions of rupees as unconscionable management fees which also defrays the acquisition cost of these companies. The interest rate spread among our banks are among the highest in the world. Our legal system continues to be archaic with its delays being outrageous. We have an ambitious ICT policy in the absence of coherent policies for English and technical education. These features are the very anti-thesis of competitiveness. |
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